Person L’s inventory of consumer debt and debt safety ratio.

Question

Calculating debt safety ratio using Worksheet 7.1. Prepare an inventory of Leo’s consumer debt. Find his debt safety ratio given that his take-home pay is $2,500 per month. Would you consider this ratio to be good or bad? Explain. Every six months, Leo Perez takes an inventory of the consumer debts that he has outstanding. His latest tally shows that he still owes $4,000 on a home improvement loan (monthly payments of $125); he is making $85 monthly payments on a personal loan with a remaining balance of $750; he has a $2,000, secured, single-payment loan that’s due late next year; he still owes $8,600 on a new car loan (monthly payments of $375); and he has a $960 balance on his MasterCard (minimum payment of $40), a $70 balance on his Shell credit card (balance due in 30 days), and a $1,200 balance on a personal line of credit ($60 monthly payments).

Answer 1

Question

Chapter 7, Problem 2FPE

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To calculate: Person L’s inventory of consumer debt and debt safety ratio.

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Calculating debt safety ratio using Worksheet 7.1. Prepare an inventory of Leo’s consumer debt. Find his debt safety ratio given that his take-home pay is $2,500 per month. Would you consider this ratio to be good or bad? Explain. Every six months, Leo Perez takes an inventory of the consumer debts that he has outstanding. His latest tally shows that he still owes $4,000 on a home improvement loan (monthly payments of $125); he is making $85 monthly payments on a personal loan with a remaining balance of $750; he has a $2,000, secured, single-payment loan that’s due late next year; he still owes $8,600 on a new car loan (monthly payments of $375); and he has a $960 balance on his MasterCard (minimum payment of $40), a $70 balance on his Shell credit card (balance due in 30 days), and a $1,200 balance on a personal line of credit ($60 monthly payments).

Alyssa Clark is evaluating her debt safety ratio. Her monthlytake- home pay is $3,320. Each month, she pays $380 for an auto loan, $120 on a personal line of credit, $60 on a department store charge card, and $85 on her bank credit card. Complete Worksheet 6.1 by listing Alyssa’s outstanding debts, and then calculate her debt safety ratio. Given her current take-home pay, what is the maximum amount of monthly debt payments that Alyssa can have if she wants her debt safety ratio to be 12.5 percent? Given her current monthly debt payment load, what would Alyssa’s take-home pay have to be if she wanted a 12.5 percent debt safety ratio?

Use Worksheet 7.1. Every 6 months, Sean Ma takes an inventory of the consumer debts that he has outstanding. His latest tally shows that he still owes $3,750 on a home improvement loan (monthly payments of $225); he is making $105 monthly payments on a personal loan with a remaining balance of $700; he has a $2,000, secured, single-payment loan that's due late next year; he has an $80,000 home mortgage on which he's making $1,050 monthly payments; he still owes $10,500 on a new car loan (monthly payments of $450); and he has a $630 balance on his MasterCard (minimum payment of $30), a $90 balance on his Exxon credit card (balance due in 30 days), and a $500 balance on a personal line of credit ($50 monthly payments). Use Worksheet 7.1 to prepare an inventory of Sean's consumer debt. Round the answers to the nearest cent. Type of Consumer Debt Creditor Currently Monthly Payment Latest BalanceDue Auto loans $ $ Personal installment loans $ $ Home improvement loan…